We’re in month seven of 2017 and already insurance experts are talking net losses. The quarterly ISO and Property Casualty Insurers Association of America (PCI) report on income and losses is negative.
It says the first quarter of 2017 net income after taxes dropped 42.2% to $7.7 billion. In 2016 the net income was $13.4 billion so the drop is significant and the lowest since the fourth quarter of 2012.
Catastrophe losses hit $7.3 billion and that’s the highest figure since the 1994 Northridge earthquake. It is $2.3 billion more than the direct catastrophe losses of the first quarter last year.
• The combined ratio fell to 99.6% compared to 97.4 a year ago.
• Net written premiums hit $135.4 billion.
• That’s up from $130.2 billion in the first quarter of 2016.
• It’s a net growth of 4% compared to the 3.2% growth rate of quarter one of 2016.
• Net investment gains jumped by $1.2 billion to $14.4 billion.
• Industry surplus is now at an all-time high at $709 billion.
Quarter two of 2017 looks a bit better according to a report issued last week by IVANS. It said almost all commercial lines saw a slight uptick in the second quarter’s premium renewal rates. Only workers’ compensation moved further into the negative.
Here’s what the report said:
• Commercial auto rose 2.57% and ended at 2.41% in June
• Premium renewals for commercial auto have been steady at about 2.66%
• Business owners policy (BOP) rates rose 4.21% compared to 3.89% in the first quarter
• It ended the quarter at 4.11%
• General liability had a renewal rate change of 1.46% in May and ended June at 2.22%
• Commercial property saw rates jump an average of 3.52% from 2.66% in quarter one
• That reverses a downward trend
• Umbrella saw a change of .94% in renewal rates compared to 1.04% in the first quarter
• Workers’ compensation started positively in the first quarter with a rise of .58%
• It ended the second quarter in the negative down .16%
Another peek at the negative is from S&P Global’s U.S. Property & Casualty Insurance Market Report. It says — in essence — net auto losses alone will go up by 7% to a new record of $154 billion.
S&P’s senior insurance research analyst Tim Zawacki said the increasing volume of claims and their costs are the reason.
“Though underwriting results in many business lines will deteriorate in 2017, we expect the P&C industry to produce only a modest underwriting loss for the year. Needed rate increases for the personal and commercial auto businesses will begin to positively impact industry results in 2017. We expect additional improvement in those lines to take place over the next several years,” he said.
The S&P report also said:
• AIG’s change in reserves and the reinsurance deal with Berkshire Hathaway will give the company better results and possibly end the volatility
• AIG’s underwriting profits should improve on several commercial lines
• Competition remains intense in non-auto lines
• Look for a slow improvement of investment returns after 2016’s historic lows
• S&P predicts an industry-wide combined ratio of 100.7% — a slight jump from 2016
• Commercial lines are predicted to see a combined ratio of 97.3% and 94.1% for workers’ compensation and 110.2% for commercial auto
• Personal lines should see a 103% combined ratio with personal auto hitting 105.9% and homeowners 95.8%
• Direct premiums will grow about 4.3%
Source links: Carrier Management — link 1, link 2, Insurance Journal